British Airways Bids To Be Bigger

LONDON — British Airways, which is teaming with United Airlines` pilots and management in a takeover bid for the giant U.S. carrier, fancies itself ``the world`s favorite airline.``

It wasn`t always so. As recently as the early 1980s, Britons commonly joked that BA stood for ``bloody awful.``

Over the last five years, British Airways has worked hard to live up to its official motto as ``the world`s favorite airline,`` in terms of both its service and its belief that the airline industry will be dominated by a few megacarriers.

BA has long been the airline carrying the most passengers on

international flights, but the company`s global ambitions have grown markedly since privatization under Lord John King, the chairman, and Sir Colin Marshall, the chief executive officer.

A key example of its ``big is beautiful`` philosophy is the marketing alliance begun with United Airlines in late 1987-an agreement that led it to join a management-union buyout offer announced Friday night.

Under that alliance, United and BA share their computerized reservations systems for flights all over the world, along with terminal space and other airport facilities in Chicago, Washington, Seattle, San Diego and New York.

The two airlines have also coordinated schedules for a number of their most popular connecting routes so that United passengers can more easily make connections for BA flights, and vice versa.

The working relationship with United gives BA a much-prized foothold in the vast U.S. market, where federal regulations bar foreign airlines from carrying passengers on domestic routes.

As a result, the number of United passengers transferring to BA flights jumped 40 percent in 1988, while the number of BA passengers connecting with United flights was up 30 percent.

When Los Angeles financier Marvin Davis` $6.4 bid brought United into play, it made sense for British Airways to join the bidding for two reasons.

First, BA wanted to protect its marketing alliance with United; if United went to another airline, particularly one of its big European rivals such as Air France, the alliance would presumably end and BA would lose its foothold in the American market.

Second, BA was looking to expand anyway, and United seemed like the most attractive available partner. ``We had already developed our thinking on a global strategy, and it was very much in line with United`s. We both see the advantage of global tie-ups,`` Derek Stevens, BA`s finance director, said in an interview Monday.

Stevens said BA`s flights currently encompass 17 percent of the world`s scheduled air routes, while United`s encompass 31 percent-none of them overlapping. Together, he said, BA and United will offer passengers nearly half the world`s existing air routes, much more than any other single airline or any other alliance of airlines.

Besides the handful of U.S. airports where the two airlines share facilities and have coordinated scheduling, Stevens said, there are two dozen more airports around the world that the two airlines serve where they have not yet coordinated their operations. ``There`s a lot of scope for improvement,`` he said.

Under the bid, United`s parent UAL Inc. would be taken over by a company called Newco, which would be owned 75 percent by United`s pilots` union and perhaps other unions, too. The existing United management, led by United chief executive Stephen Wolf, would take 10 percent while British Airways would hold 15 percent.

Stevens acknowledged that the BA bid for United may trigger a protectionist backlash, and perhaps even a move in Congress to block the deal. But he figures BA has support of United pilots and management, while other foreign carriers have taken shares in U.S. airlines recently with no formal reaction from Washington.

In addition, Stevens notes that BA`s 15 percent share would be well below the 25 percent maximum foreign holdings allowed in a U.S. airline under federal law and that a significant portion of BA`s shares-19 percent-are held by U.S. investors.

Stevens said no plans have been made, but if and when the merger goes through the two airlines will begin contemplating further links, such as buying equipment and building terminal facilities together.

It`s possible, he added, that they may want to capitalize on BA`s ``good reputation`` in the States-a far cry from the ``bloody awful`` of a few years ago.

Predictably, the view among analysts in the City, London`s financial district, is not as rosy as at BA headquarters.

Tim Coombs, an aviation analyst with County NatWest stockbrokers, says Davis, whose original $6.4 billion bid was worth $275 per United share, may try to top the Newco $300 per share offer. If that happens, he`s not sure BA should try to raise the stakes.